BEIS has just published the Government's response to its March 2018 consultation on "Insolvency and Corporate Governance" reforms. The response identifies a number of proposals for reform, as summarised below:

Action to improve the insolvency framework in the cases of major failure

In early 2017 we reported that following various scandals affecting business in the UK, the Government had made it clear that it intended to crack down on unacceptable boardroom behaviour.

A report published by the Business, Energy and Industrial Strategy Committee suggested that the existing law governing corporate governance did not require revision. However, the Committee recommended a number of measures including a voluntary code of corporate governance for large private companies.

On 26 August, the Government announced that it will be making changes to UK insolvency legislation. The changes are intended to support distressed companies and address issues highlighted by major company failures and include:

The new Insolvency Practice Direction 2016 has finally been given approval by the Lord Chancellor and came into force yesterday (25 April) bringing with it changes to reflect the new Insolvency Rules 2016 and recent changes to the CPR. The new practice direction replaces that of 2014 with immediate effect. Key changes include:

 March 2018 The Government has issued a Consultation on proposals designed to reduce the risk of major company failures and to strengthen the responsibilities of directors in the context of actual or threatened insolvency. The principal specific proposals are: • directors of a holding company that sells an insolvent subsidiary to be required to take into account the interests of the creditors of that subsidiary and possibly its other stakeholders • the unwinding of transactions that have “unfairly removed value” from a company that becomes insolvent.

With the news of major government contractor Carillion's liquidation, we look at the practical steps public bodies should be taking if Carillion is one of their contractors or is part of their supply chains so as to ensure there is as little disruption as possible across their service areas.

Contract review

In 2016 the High Court considered the validity of an assignment of a lease by a tenant to its guarantor. The antiavoidance provisions in section 25 of the Landlord and Tenant (Covenants) Act 1995 ("1995 Act") strictly limit the freedom of contract of parties to leases governed by that Act, broadly, those granted after 1995. Agreements which frustrate those provisions are void even if they are commercially justifiable.

BRIEF FACTS AND DECISION

EMI Group Limited v O&H Q1 Limited [2016] EWHC 529 (Ch)

New Rules for Imposing Personal Liability on Directors of Insolvent Companies

When a company enters into an insolvency process, a director may be made personally liable for an insolvent company’s debts on a few limited bases under the Insolvency Act 1986, the most common of which are:

1. wrongful trading: if the director knew or ought to have known that there was no reasonable prospect of avoiding insolvent liquidation and he did not take every step necessary with a view to minimising the loss to creditors;

The Housing and Planning Act 2016 (the “Act”) introduces special administration procedures for social housing associations which aim to protect the level of social housing in the UK. The new housing administration orders (“HAOs”) create an additional objective for insolvency practitioners to try to keep social housing in the regulated housing sector to maintain levels of social housing.

Introduction